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Old June 20th, 2014, 04:54 PM
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Default ICFAI University MBA International Management I Exam Question Papers

Here I am looking for the previous year question paper of ICFAI University MBA International Management I Exam, can you please provide me the same???
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Old June 21st, 2014, 03:02 PM
Rohit Barla
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Default Re: ICFAI University MBA International Management I Exam Question Papers

As you are looking for the previous year question paper of ICFAI University MBA International Management I Exam, so here I am sharing the same with you

1. The phenomenon of a particular country simultaneously importing and exporting the same product is known as
(a) Inter-industry trade
(b) Intra-industry trade
(c) Inter-commodity trade
(d) Intra-commodity trade
(e) Cross country trade.

2. The following is not an example of fixed exchange rate system
(a) Currency board system
(b) Target zone arrangement
(c) Crawling peg system
(d) Monetary union
(e) Bretton Woods system.

3. The term risk-free arbitrage refers to the process of
(a) Buying one currency and selling another currency at the same time in the same market or across different
markets
(b) Buying and selling the same currency at the same time in the same market
(c) Buying and selling the same currency at the same time in the same market or across different markets
(d) Buying or selling the same currency at the same time in the same market or across different markets
without commitment of any capital or risk
(e) Buying or selling the same currency at the same time in the same market or across different markets
using money market.

4. A letter of credit which allows the Issuing bank to make payment to the beneficiary in installments is known as
(a) Red clause L/c
(b) Green clause L/c
(c) Revolving L/c
(d) Transferable L/c
(e) Deferred L/c.

5. Consider the following information:
One-year interest in U.K is 5% p.a.
One-year interest in India is 8% p.a
The spot exchange rate is Rs.83.84/£. If the interest rate parity holds good what would be the 6-month forward
exchange rate?
(a) Rs.81.51/£
(b) Rs.82.63/£
(c) Rs.85.07/£
(d) Rs.85.18/£
(e) Rs.85.24/£.

6. Triffins Paradox is associated with
(a) Purchasing power parity
(b) Interest rate parity
(c) Forecasting of exchange rates
(d) Computation of trade deficit
(e) Collapse of Bretton Woods system.

7. In which of the following statements/returns the details of export bills which remain outstanding beyond the due

i.exedate for payment are to be furnished to RBI?
(a) XOS statements
(b) BEF statements
(c) R-returns
(d) ENC statements
(e) GR forms.
8. Which of the following would most likely cause a nation’s currency to depreciate?
(a) An increase in the nation’s domestic inflation rate
(b) A decrease in domestic real interest rates
(c) A decrease in the nation’s domestic inflation rate
(d) An increase in inflation rate of the nation’s trading partners
(e) A decrease in money supply in the domestic economy.

9. Which of the following are the privately placed bonds issued and offered to different market segments that
consist of institutional investors, including banks in the Japanese markets?
(a) Samurai bond
(b) Shogun bond
(c) Shibosai bond
(d) Yankee bond
(e) Bulldog bond.

10.M/s. Bharat Overseas Corporation is a star trading house engaged in exports and imports. On April 30, 2008, the
company who has an import worth $200,000, booked a two month forward contract for the import transaction at
Rs.41.64/$.
On June 14, 2008 the company requested the bank to extend the contract for delivery on July 31, 2008.
The following are the on going market rates and the forward premium:
June 14, 2008
Spot 41.02/04
June 09/11
July 36/38
August 54/56 Forward rate for the import transaction given by the bank on 14.06.08 (after
ignoring margin) was
(a) Rs.41.38
(b) Rs.41.40
(c) Rs.41.42
(d) Rs.41.56
(e) Rs.42.02.

11.The difference between the time when a new product is introduced in the country and the time when the
consumers in the other country require it, is called
(a) Imitation lag
(b) Supply lag
(c) Technology lag
(d) Demand lag
(e) Production lag.

12.Which of the following international institutions endeavors to finance the projects which may not be financially
profitable in developing countries?
(a) International Bank for Reconstruction and Development
(b) International Finance Corporation
(c) International Development Association
(d) International Monetary Fund
(e) UNESCO.

13.Which of the following statements is false in respect of exports under exchange control regulations?

(a) Export proceeds have to be realized on due date or within six months from the date of shipment
whichever is earlier
(b) Exporters having a good track record may be permitted to open foreign currency accounts with banks
abroad for crediting the export proceeds
(c) Every exporter is required to obtain an Importer-Exporter Code Number from the
Director General of Foreign Trade
(d) Export proceeds cannot be received in foreign currency notes
(e) Exporter is required to submit shipping documents to authorized dealer within 21 days from the date of
shipment.

14.Which of the following policies does not help a country to correct its current account deficit?
(a) Subsidizing the exports
(b) Letting the exchange rate depreciate
(c) Free foreign grants
(d) Expanding aggregate demand
(e) Taxing imports.

15.Which of the following statements is/are true about ‘leading and lagging technique’?
I. It is an internal hedging technique.
II. Leading involves making payment before it is due.
III. Lagging means postponing a payment beyond its’ due date.
IV. A company may lead the payment in a currency that is likely to appreciate.
V. A company may lag the payment that is likely to depreciate.
(a) Only (I) above
(b) Both (II) and (III) above
(c) Both (IV) and (V) above
(d) (II), (III), (IV) and (V) above
(e) All (I), (II), (III), (IV) and (V) above.

16.Which of the following serves as an evidence that the goods have actually been imported into India for the
remittance sent in foreign currency by an Authorized Dealer (AD)?
(a) Bill of Lading
(b) Bill of Entry
(c) Air Way Bill
(d) Combined Transport Bill of Lading
(e) House Airway Bill.

17.If a country follows floating exchange rate system, which of the following statements is not true?
(a) The exchange rates between the currencies are variable
(b) The exchange rates are determined by the demand and supply for the currencies in the international
market
(c) International trade in goods and services facilitates the movement of currencies between the countries
(d) If the country is facing a deficit or surplus the exchange rates get automatically adjusted and this leads to
a correction of imbalance
(e) The exchange rates are determined as a result of pegging to either some common commodity or
currency.

18.The relationship between the spot and forward exchange rates between a pair of currencies is brought about
principally through
(a) The Fisher effect
(b) Purchasing power parity
(c) Covered interest rate arbitrage
(d) Uncovered interest rate arbitrage
(e) Interest rate parity.

19.Consider the following:
Rs/Can$ Spot : 41.19/41.21
Interest rates (1 year) Rs. : 6.00% - 6.50% p.a.
Can$: 3.50% - 3.75% p.a. What should be the 1-year forward bid rate of
dollar to prevent arbitrage?

3(a) ≤ Rs.42.21
(b) ≤ Rs.42.40
(c) ≥ Rs.42.30
(d) ≤ Rs.45.85
(e) ≤ Rs.44.78.
20.Expropriation refers to
(a) Government restraining repatriation of profits
(b) Government taking over without paying compensation
(c) Government taking over by paying compensation
(d) Government restraining future investments by foreign investors in home country
(e) Government treating a country as enemy country.

21.In which of the following cases of International Commercial Terms (INCOTERMS), the seller has to make
payment of freight charges for transportation of goods to buyer
(a) EXW (Ex Works)
(b) FAS (Free Alongside Ship)
(c) DES (Delivered Ex Ship)
(d) FCA (Free Carrier)
(e) FOB (Free on Board).

22.Payment to a foreign technical consultant for professional services rendered by him is recorded under which of
following heads of Balance of payments (BOP) statement?
(a) Merchandise
(b) Miscellaneous
(c) Unilateral transfers
(d) Official reserves account
(e) Errors and Omissions.

23.An import quota is
(a) A tax on imported goods
(b) A ban not to import such goods
(c) A flat duty on imports
(d) A limit on the number of units that can be imported
(e) A tariff barrier.

24.Dendanske Bank, Copenhagen is maintaining a Pound Sterling account with Marine Midland Bank, London.
Dendanske Bank while corresponding with Marine Midland Bank, London, refers this ‘Pound Sterling’ account
as
(a) Nostro account
(b) Loro account
(c) Vostro account
(d) Shadow account
(e) Mirror account.

25.Consider the following rates quoted in forex market:
Rs./$ : 42.66/68
$/£ : 1.9484/86
The synthetic quotes of Rs./£ are
(a) 83.12/17
(b) 83.13/39
(c) 83.15/18
(d) 83.18/24
(e) 83.21/27.

26.The capital inflow of a country is influenced by
I. Return on investment.
II. Risk exposed.
III. Political stability.
IV. Stage of the economic cycle.
V. Movement of exchange rate.

(a) Both (I) and (II) above
(b) (I), (II) and (III) above
(c) (I), (II), (III) and (IV) above
(d) (I), (II), (III) and (V) above
(e) All (I), (II), (III), (IV) and (V) above.
27.Which of the following states that the real interest rates are equal across different countries?
(a) Purchasing power parity
(b) Interest rate parity
(c) International Fisher effect
(d) Fisher open condition
(e) Marshall-Lerner condition.

28.The mechanism of protecting the domestic economic activity from external disturbances is called
(a) Price specie flow mechanism
(b) Sterilization
(c) Deneutralization
(d) Perfectionism
(e) Economic adjustment mechanism.

29.Forward spread means
(a) The spread between two forward rates of different maturities
(b) The spread between two option forward rates
(c) The spread between outright forward rate and option forward rate
(d) The spread between two forward rates
(e) The spread between forward rate and spot rate.

30.When some foreign countries subsidize their exports, the importing country may impose a duty, which is called
as
(a) Anti-dumping duty
(b) Specific duty
(c) Ad-valorem duty
(d) Countervailing duty
(e) Compound duty.


END OF SECTION A

Section B : Problems/Caselets (50 Marks)
• This section consists of questions with serial number 1 – 6.
• Answer all questions.
• Marks are indicated against each question.
• Detailed workings/explanations should form part of your answer.
• Do not spend more than 110 - 120 minutes on Section B.

1. Bombay Swadeshi Silk Exports (P) Ltd., Mumbai, imports raw silk from China and
exports silk sarees, fabrics and scarves to east Asian and European countries.
Imports are invoiced in US dollars and exports are invoiced in euro currency. The
company has receivables of €500,000 and payables of $200,000 three months from
now. The Vice-President (Finance) Mr. Khemchand Bhatia, obtained the following
exchange rates quotations from the market and is considering to cover the
exposures either through the forward market or money market.
Exchange rates Rs./Euro Rs./$
Spot 62.96/98 40.06/08
Three month forward 63.24/26 40.30/32
The current interest rates (per annum) are as under
Maturity Rupee (%) Euro (%) $ (%)
3 months 6.00/8.00 4.50/4.70 2.50/2.70 You are required to
advise Mr. Khemchand Bhatia as to which alternative should be better for covering
both the payables and receivables. (10marks)

52. A Multi National Corporation based in Australia has identified surplus funds to the
tune of Aus$5 million for three months. The Vice-President (Finance) has collected
the following information from his banker to invest in any currency including home
currency to earn more interest without exposing the investment to exchange risk.
For this purpose he proposes to cover the foreign exchange exposures through
forward market.
Aus$/$ Spot 1.0841/44
3 months 54/56
€/$ Spot 0.6338/41
3 months 11/13
Can$/$ Spot 0.9886/93
3 months 02/04 3 months interest rates (p.a.)
Aus$ : 2.40%-2.80%
€ : 4.20%-4.50%
Can$ : 3.60%-4.00% You are required to determine the currency in
which the company should invest to earn more interest on the surplus funds.
(10marks)

Caselet 1
Read the caselet carefully and answer the following questions:


3. “The asset demand for gold is traditionally associated with the view that gold
provides as effective hedge against inflation and other forms of uncertainty”.
Discuss the various reasons that lead to the spurt in the demand of gold. ( 8 marks)

4. Enumerate the factors that are driving up the gold prices in the current scenario. ( 7 marks)

The demand for gold comes from two different sources first is the ‘use demand’
where it is used directly in the production of jewellery and the second is the ‘asset
demand’ for gold as an investment.
The first approach models variation in the price of gold as a result of changes in the
macroeconomic variables, such as exchange rates, interest rates, world income and
political shocks. The second approach focuses on speculative-versus-rationality
factors behind the gold price movements. The third approach examines gold as a
hedge against inflation with particular emphasis on short-run and long-run
relationships between gold and the general price level. In the recent past,
decoupling seems to have been happening between the exchange rates and gold
prices with the dollar losing its shine as the world’s reserve currency and the
absence of any other currency that has the potential to take its place. Given this
scenario, gold is emerging as an asset worth owning and hence unabated demand
will continue as long as the uncertainty on the exchange rate front continues.
Easy monetary policies by central banks have created global cash glut and a credit
bubble. This mammoth global monetary growth has led to easy cash availability in
the market place which has a tendency to bid up prices for goods, services and
housing thus resulting in severe inflationary pressures. India is the world’s largest
consumer of gold jewelry. In India, gold is ranked just below bank deposits as a
savings and investment vehicle. Internationally, despite the mayhem in the stock
markets, by January end, gold prices rose and reached a new all-time high of $924
an ounce in the London spot market. The gold price at the close of January was
above $920 per ounce. In line with international price movements, gold prices in
India rose and in February, reached Rs. 11,895 on the bullion market.
However, “the combination of record prices and high volatility is a deterrent to
jewelry buying by both the trade and consumers. This form of demand may not
therefore be strong in the first quarter of 2008 and may remain under pressure while
prices remain volatile.”

61
Caselet 2
Read the caselet carefully and answer the following questions:


5. ‘Depreciating dollar is perhaps bad news not only for the US but also to rest of the
world’. Discuss the various reasons for depreciation of dollar against the other
currencies. ( 8 marks)

6. ‘The collapse of the dollar may put the global economy in a slump’. Discuss the
probable impact of depreciating dollar on the emerging economies like India and
China. ( 7 marks)

The dollar has depreciated against other major currencies. After the Federal Reserve
announced the reduction in interest rates, the dollar fell even further, to a level not
seen since 1997. The falling dollar could be an outcome of trade account and
current account deficits run by the US in the past. Since then, from its peak in 2002
and October 2007, the dollar has fallen approximately 28% in nominal terms and
about 25% in real-terms. A weak dollar is not a novel concern. This gradual decline
of the US dollar could lead to the discarding of huge dollar reserves held by
countries worldwide. In addition to this, the risk of US recession or other factors
that could also cause a loss of confidence in the dollar, pose major risks to this
scenario. A dollar crisis will be very damaging for the global economy, making the
expected slowdown much deeper and long-lasting.
Some of the countries want to explore other growing economies for investment
opportunities. The slowdown of US economy is compelling investors to look for
better returns elsewhere causing the outflow of dollars from the US. Net private
capital inflows into the US have weakened sharply since August 2007. This
downward trend of dollar and current account adjustment had also happened in the
1980s. The downward pressure of dollar is causing an imbalance in the world
economy. Fed’s new Chairman Ben Bernanke hinted at a rise in inflation levels,
resulting in slackening of the US economy. Due to excess capacity available in the
world economy, it is difficult to avoid the impending crisis. The excess capacity in
the world is also due to wrong policy action of many governments which bailed out
their financial institutions by expanding their credits. Their currency always flowed
into the US in search of a safe investment option, these are signs of change that
may further weaken the dollar.
Many economists are forecasting that the dollar will fall against the yen and the
euro for the next couple of years and it is inevitable. If the same trend continues at
the same pace, the dollar will lose its sheen in the international finance segment. It
will have serious repercussions for the US economy and the world economy at
large.


Section C : Applied Theory (20 Marks)
• This section consists of questions with serial number 7 - 8.
• Answer all questions.
• Marks are indicated against each question.
• Do not spend more than 25 -30 minutes on Section C.


7. Exporters are to be provided adequate credit at competitive interest rates in
order to ensure steady export growth. Explain in detail about the pre-shipment
finance. ( 10 marks)

78. Write short notes on:


a. International Cartels. ( 5 marks)
b. Imitation Gap Theory of International trade. ( 5 marks)

END OF SECTION C

END OF QUESTION PAPER
8Suggested Answers
International Management – I (MB3G2IB) : October 2008
Section A : Basic Concepts
Answer Reason
1. B The phenomenon of a particular country simultaneously importing and exporting the
same product is known as intra-industry trade.

2. C Under crawling peg system, while the value of a currency is fixed in terms of a
reference currency, this peg itself keeps changing in accordance with the underlying
economic fundamentals whereby market forces play a role in the determination of the
exchange rate

3. D The term risk-free arbitrage refers to the process of buying or selling the same
currency at the same time in the same market or across different markets without
commitment of any capital or risk

4. E A letter of credit which allows the issuing bank to make payments in installments is
known as ‘Deferred L/C’.

5. C Spot rate Rs./£ = 83.84
6-month forward rate =
0.08 83.84 1
2
0.05 1
2


= Rs.85.07/£

6. E Triffins paradox is associated with collapse of Bretton Woods system.
7. A The details of export bills which remain outstanding beyond the due date for payment
are to be furnished to RBI in XOS statements.

8. A Option in (a) would most likely cause a nation’s currency to depreciate.
9. C Shibosai Bonds are privately placed bonds issued in the Japanese markets. Shibosai
bonds are offered to a different market segment that consists of institutional investors,
including banks.
• Samurai bonds are issued by non-Japanese borrowers in the domestic Japanese
markets.
• Dollar denominated bonds issued in the US domestic markets by non-US
companies are known as ‘Yankee bond’.
• Bulldog bonds are sterling denominated foreign bonds which are raised in the
U.K. domestic securities market.
• Yankee bonds are US dollar denominated issues by foreign borrowers usually
foreign governments or entities, supra-nationals and highly rated corporate
borrowers in the US markets.
• ‘Shogun Bonds ‘are publicly floated bonds in Japanese market in foreign
currency by non-Japanese borrowers.

10.C Forward rate given by the bank for import transaction on 14.06.08 = 41.04 + 0.38 =
Rs.41.42/$.

11.D The difference between the time a new product is introduced in the country and the
time when the consumers in the other country require it, is called Demand lag.

12.C International Development Association endeavors to finance the projects in
developing countries which may not be financially profitable, but indirectly may have
a positive effect on the concerned economy.

13.D Export proceeds may also be paid by foreign currency notes/foreign currency
travelers cheques by the buyer on his visit to the country. All other options are true.

14.D Expanding aggregate demand do not help a country correct its current account deficit.
Hence option

9(d) is said to be the correct answer.
15.E It is an internal hedging technique (I) .Leading involves making payment before it is
due (II) .Lagging means postponing a payment which is already due (III). A company
may lead the payment in a currency that is likely to appreciate (IV). A company may
lag the payment that is likely to depreciate (V).

16.B Bill of Entry serves as evidence that the goods have actually been imported into India
for the remittance sent in foreign currency by the ADs. Options in (a), (c), (d) and (e)
are documents of title to the goods and these documents are issued by carrier agents.
17.E Under fixed exchange rate system, the value of a currency in terms of another is
fixed. The fixed exchange rates result from countries pegging their currencies to
either some common commodity or to some particular currency.
Statements (a), (b), (c) and (d) represent the characteristics of floating exchange rate
system.

18.C The relationship between the spot and forward exchange rates between a pair of
currencies is brought about principally through covered interest arbitrage. The fisher
effect says that the real interest rates are equal across different countries. Purchasing
power parity says that the exchange rate between two countries currencies is
determined by the respective price levels in the two countries. Correct answer is (c).

19.B Assume we borrow Rs. 100 for 1 year
We should pay after 1 year (100) (1+0.065) = Rs.106.50
If we convert Rs. 100 into Canadian dollars for investment we obtain 100/41.21 =
Can$2.4266
If we invest $ 2.4266 for 1 year @ 3.5% p.a., the investment would yield (2.4266)
(1+0.035)
Can$ 2.5115 after one year
To prevent arbitrage,
Rs.106.50 ≥ Can$ 2.5115 Fb
Fb ≤ Rs. 42.40/Can$

20.C Expropriation refers to Government taking over by paying compensation
21.C In the case of delivered ex-ship contract, the seller has to make payment of freight
changes for transportation of goods to buyer. In all other cases of options a, b, d, and e
the buyer has to bear the freight changes.

22.B Payment made to a foreign technical consultation for professional services rendered
by him will appear as a debit item under the head ‘Miscellaneous’.

23.D An import quota is a limit on the number of units that can be imported.
24.A Dendanske Bank, Copenhagen is having an account with Marine Midland Bank,
London. When Dendanske Bank, Copenhagen refers to this account, while
corresponding with Marine Midland Bank, London, it would refer to this account as
Nostro account. Nostro account means “our account with you”.

25.A Rs./£ bid = Rs./$ bid x $/£ = 42.66x 1.9484 = Rs.83.12/£
Rs./ £ ask = Rs./$ ask x $/£ ask = 42.68 x 1.9486 =Rs.83.17/£
Rs./ £ synthetic quote = 83.12/83.17.

26.E The capital inflow of a country is influenced by return on investment, risk exposed,
political stability, stage of the economic cycle and movement of exchange rate.

27.D Fisher open condition states that the real interest rates are equal across different
countries.

28.B The mechanism of protecting the domestic economic activity from external
disturbances is called ‘sterlization’. It is also known as neutralization.

29.E Forward spread means the spread between forward rate and spot rate. Other options in
(a), (b), (c) and (d) are not correct.

1030.D When some foreign producer is found selling his product at a price which will not
fetch him his cost even, anti-dumping duty may be levied which is different from the
countervailing duty imposed on goods which have been subsidized by the foreign
country. Specific duty is a flat duty based on the number of units regardless of the
value of goods. Ad valorem duty is expressed a percentage of the value of goods. A
compound duty is a combination of specific and ad valorem duty.


11Section B : Problems/Caselets
1.a. Payable of US$ 200,000 after 3 months
(i) Cover through forward market
Rupee outflow = 200,000 × 40.32
= Rs.8,064,000
(ii) Cover through money market
Borrow rupee, convert it into US$ at spot rate and invest for 3 months.
US dollars to be invested =
200,000
0.0250 1
4

= $198,757.764≈ 198,758
This amount with interest which is $ 2,000,000 after 3 months is used to settle the payable
Amount to be borrowed now in rupees
198,758 X 40.08
= Rs.79,66,220.64
say Rs.79,66,221
Amount to be repaid with interest
= 79,66,221
0.08 1
4

≈ Rs.81,25,545
We see that outflow under forward cover is less than the money market cover. Therefore the company must
cover the exposure through the forward cover.
b. Receivables of Euro500,000 after 3 months
i. Cover through forward market
Rupee inflow = 500,000 × 63.24
= Rs.3,16,20,000
ii. Cover through money market
Borrow € 500,000 for 3 months convert into rupee and invest for 3 months
€ to be borrowed =
500, 000
0.047 1
4

= 49,41,93.23 ≈ 4,94,193
Rupee inflow at spot rate = 4,94,193 X 62.96 = Rs.3,11,144,391.28
Rupee inflow after 3 months with interest at 6%
= .3,11,144,391.28
0.06 1
4

= Rs.31,581,107.15
Rupee inflow is less under money market cover than forward cover. The company must use forward market
cover to have more inflow of rupees for the receivable.

Rest of the Questions are attached in below file which is free of cost
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